Emma Rothschild’s fascinating study of the “decline of the auto-industrial age” tells us more about the peculiar plans of the auto industry and how they have gone awry than any other account of America’s fading love affair with the car. One could write a social history of the United States around the auto industry, for it has not only transformed the countryside and the cities but also our basic national attitudes about work, leisure, and the pursuit of happiness. Ms. Rothschild has not attempted this but she has written a well-researched morality play which shows with painful clarity why all the crises we associate with the car arose and why the US auto giants are incapable of resolving them.
What troubles the auto industry most is a failure of confidence. For both buyers of cars and buyers of car stocks the industry has lost its magic. GM’s total profit for 1972 was $2.16 billion, a figure in excess of the gross national product of a number of small countries; but according to Ms. Rothschild, it represents a lower profit rate per car in real dollars than the company earned in 1950 or 1928. The “harassment” by the consumer movement, as former president James Roche called it, has led to federal antipollution regulation; as a result, Ford’s president Lee M. Iacocca warned, the auto industry “has been backed to the cliff edge of desperation.” (Mr. Iacocca seemed genuinely hurt at the adverse publicity he received when he came to Washington to lobby against the Clean Air Bill.) It is now a cliché in the industry to lament the “rising tide of consumerism” and its excessive preoccupation with auto safety. (More than 30 million defective cars and trucks have been recalled since 1966.)
Mr. Roche’s curious metaphysical explanation of increasing sales resistance is that the American romance with the car has “blossomed into a marriage.” By this he means that the automobile has become an increasingly popular target for the sort of harsh criticism that ten years ago only eccentric social critics would make. A Seattle Chevrolet and Fiat dealer with an instinctive understanding of the repressed anger people feel toward cars has substantially increased his sales by using TV commercials in which he smashes the fenders, headlights, and windshields of some of his new models. Rothschild reports that the customers are eager to buy his cars once they have been chastened and repaired.
In the simpler day when cars could. be sold by having them stroked by sexy models instead of beaten by sledgehammers, investors readily put their money into automotive stocks, but now, as Forbes Magazine asks, “Who wants the nongrowth or slow growth stocks like GM?” The industry has ceased to command the technological frontiers which long ago were taken over by the electronics computer and other high-technology industries. The Wankel rotary engine, the only significant technological advance in basic car design since the war, was invented in Germany and developed in Japan. Productivity in the industry is notoriously low. These problems are of course related to two others—rising foreign competition, symbolized by the small gas-saving car, and mounting labor unrest, symbolized by the famous Lordstown strike.
Paradise Lost was published a few months ago before the “energy crisis” had been officially certified and sixty cents a gallon gasoline was still only a threat. Recent events have, of course, compounded the industry’s miseries. According to The New York Times (March 24, 1974) GM’s sales are down 35.7 percent. The company has closed fifteen of its twenty-two assembly plants, laid off 65,000 workers and furloughed 57,000 more, and despite Chairman Richard Gerstenberg’s Nixonian pronouncement that “business is getting better” security analysts are predicting first quarter earnings in the range of thirty-five cents to one dollar a share (down from $2.84 a share a |year ago).
Emma Rothschild’s account of the decline of the American car analyzes two strategies for making money, both enormously successful in the past, which keep the industry from dealing with the realities of the 1970s. One is associated with the master builder of GM, Alfred P. Sloan, and the other with Henry Ford. “Sloanism,” the strategy that enabled GM to wrest a quarter of the American market from Ford in the 1930s, stressed marketing and consumer credit rather than technical invention. (For example GM’s recently announced “new” energy absorbing bumper will provide us with a safety device available to purchasers of the Pierce Arrow in the 1920s.)
Alfred Sloan, who believed that the “primary object of the corporation was to make money, not just to make motor cars,” built his empire on the principle of product differentiation. “It is perfectly possible,” he pointed out, “from the engineering and manufacturing standpoint, to make two cars at not a great difference in price and weight, but considerably different in appearance.” Sloan was aware that market saturation was already a problem in the Great Depression—in 1930 there was one car for every 5.5 Americans, a level Britain did not reach until 1966. He understood that if the industry were to double the density of cars in the United States, which is exactly what happened, the appeal would have to transcend mere practicality. Hence the annual model change, the emphasis on color and “styling,” the myriad accessories to make the family car a source of entertainment and solace. (In 1973 the inheritors of Sloan’s empire were selling $9,000 Cadillacs by offering “a laprobe and a pillow.”) The result of this process of “upgrading,” to use Sloan’s term for the perpetual trade-in, is the 5,500 pound, gas-devouring Oldsmobile which, increasingly, will provide its entertainment and solace sitting in the garage.
Ms. Rothschild’s most striking case study is the Vega. Supposedly it was to be GM’s answer to foreign small car competition, but in obedience to the spirit of Alfred P. Sloan, the marketing men who control the company kept loading accessories and model variations onto it. Still in the thrall of Sloanism, the company appears incapable of offering simple, inexpensive, dependable transportation. GM will be making fewer small cars next year than Ford. The revelation that the public may not want “more car per car” has come late. It is not easy for a giant to shift its investment from one product line to another, particularly when the change-over would require its bureaucracy to look at America with new eyes.
“Fordism,” which Ms. Rothschild defines as “the technology of mass assembly-line production…based on the ‘rational’ reorganization of work to fit the rhythm of the new machinery,” is primarily a strategy of cost-cutting. Henry Ford, inspired by Frederick Winslow Taylor’s theories for “dividing and subdividing” operations, envisaged the perfect productive process as a continuum, in which men and machines would be extensions of each other. Just as Ford executives are Sloanists so GM executives are Fordists. Shortly before his elevation to the chairmanship of GM, for which he is paid $875,000 a year, Richard Gerstenberg observed that “the situation calls for a cost-cutter, rather than a product developer and innovator.” The basic cost-cutting strategy in the auto industry is to increase productivity through automation.
In contrast to such industries as shoes and electronics which moved substantial portions of their production abroad in the late 1960s to “export platforms” in Taiwan, Singapore, Korea, and other suppliers of eighteen-cents-an-hour workers, the US automobile companies do not yet depend heavily on cheap foreign labor. But the move toward overseas production is accelerating. Ford is building Pinto engines in Brazil and has erected a $160-million plant in Spain, a country which Henry Ford notes offers “social peace.” (In Brazil the ruling generals who have abolished unions and frozen or reduced wages can offer a 2 percent absenteeism rate as compared with 14 percent in Germany.) The main motive for moving abroad in the auto industry, however, is not to cut labor costs but to open up new markets. In contrast to the glutted US market there are only three vehicles for every thousand persons in Indonesia and six per thousand in Taiwan. GM’s Harimau, made in Malaysia, sells for $1,400, and Ford’s Fiera, “a modern Model-T for the masses,” as Ford’s Asian subsidiary president calls it, sells for $200 less. (The per capita annual income in this “fastest growing vehicle market of Southeast Asia” ranges from $100 to $300 a year.)
While the effort to increase markets is more and more concentrated on less jaded societies, the campaign to cut costs is concentrated in the United States. In its highly automated Lordstown plant with its famous “Unimate” robot welders, GM had hoped, The Wall Street Journal reported, “to wring about 10 percent out of the normal labor costs of producing an automobile.” The United States, according to former Secretary of Commerce Peter Peterson, has the lowest productivity rate “of any developed nation in the free world.” (In the late 1960s the Japanese productivity rate was nine times that of the United States.)
GM’s answer in Lordstown, in addition to labor-displacing machines and futuristic automatic control and inspection devices, was to increase the speed of the speed-up. The system created in the 1910s for exacting more work per dollar from employees was carried to new heights on the Lordstown assembly line. The workers were confronted with a new Vega to assemble every thirty-six seconds, using a conveyor system that moves up and down so they would not lose time stretching or bending. Ms. Rothschild interviewed workers off the line whose jobs are also “engineered to a fraction of a second” with no allowance for frequent time-consuming mechanical failures.
As the author points out, Lordstown is the embodiment of the original Henry Ford’s dream, which he described in My Life and Work, of a factory featuring “the reduction of the necessity of thought on the part of the worker and the reduction of his movements to a minimum.” The extreme discontent which erupted in the 1972 strike was caused mostly by the speedup which reduced the working day to an endless series of programmed muscular twitches. Men and women were assigned as assistants to the robots, to help the much-publicized machines with menial tasks, to which they were ill suited. Under Lordstown’s humiliating discipline, workers were forbidden to leave their jobs even for a minute without permission. They had to produce a note from the funeral director when they went to a family burial. “Fordism” at GM is no different, it seems, from what it was at Ford in 1931 when a worker told Edmund Wilson, “A man checks his brains and his freedom at the door when he goes to work at Ford’s.”
“Sloanism” and “Fordism,” or in the business-school parlance, product differentiation and cost-cutting, are characteristic not only of the auto industry but of all oligopolies. Where the market is shared by a handful of giants, as is also true in the electronics, computer, drug, packaged food, and other leading industrial sectors in the United States, competition to maintain or enlarge the firm’s share of the market is not based on price or on creating products that are basically new. Rather, the competition consists in marketing nonessential characteristics that distinguish an item from the competitor’s substantially identical version of the same product—the hole in “lifesavers” is a triumph of the product differentiator’s art—and in an aggressive race to out-produce the competitors at less cost.
Mass-produced automobiles in the same price range are virtually indistinguishable from one another, regardless of trade mark, as are cigarettes and laundry soap. It is in the interest of each manufacturer to maintain a gentleman’s agreement on prices because all stand to lose from a price war. But Zeniths and Hitachis, Bayer and St. Joseph’s aspirin, Coke and Pepsi, are also identical. Each competitor must protect his share of the market or extend it by packaging his product in an inventive way, or by surrounding it with a special aura by means of a mass advertising campaign. The enormous increase in paper and plastic consumption in the last generation is a direct consequence of such oligopolistic sales strategies. Firms have become dependent for their very survival on eye-catching, resource-devouring frills.
The sharply intensified concentration of the most dynamic industrial sectors of the economy has led also to an intensified battle to cut labor costs. Organized labor is losing ground in the struggle to keep wages in line with the steeply rising cost of living. While the large firm can more easily pass on increased labor costs to the public, it is also able to use its size and power to resist union pressure and to develop strategies which are making the American production worker increasingly obsolescent. These strategies include not only the sophisticated automation techniques which Ms. Rothschild describes for the auto industry but also the removal from American territory of production facilities in key industries. The conversion of the US into a “service economy” is having an adverse effect on labor’s bargaining power and is also beginning to have an adverse effect on income distribution in the United States. The auto industry provides a good example of the serious social consequences of oligopoly power, but it is by no means unique.
Paradise Lost is a morality play because it shows how the arrogance and insensitivity of the industry lead inexorably to its decline. Unlike the “Seven Sisters” who dominate the energy industry, which is far more globalized and hence much more independent of the United States than the giant car manufacturers, the auto industry has found the “energy crisis” to be a disaster, not a source of extra profit. But, unfortunately, as well deserved as Messrs Gerstenberg and lacocco’s troubles may be, the rest of us cannot afford to enjoy them. Like mythic heroes, oligopolists, when they fall from paradise, bring millions down with them. Indeed, the threat of collapse, which Lockheed, for example, has shrewdly used to negotiate its rescue at the taxpayer’s expense, is a unique asset of corporate giants. In earlier times the hold over our national life of a few huge business organizations was widely attacked as a threat to American democracy. That case can be made in even stronger terms today. But it is now much clearer that oligopoly power also threatens American prosperity.
May 2, 1974